Earlier this month, Google made waves with its acquisition of the phone maker HTC for $1.1 billion. The move changes the tech landscape, and experts have posited two main reasons for Google’s decision: capturing market share (and customer base) from Apple, and strengthening its hardware arm.
As with any acquisition, Google’s recent power move was not made lightly; it involved many discrete components and a great deal of due diligence. From the outside, Google’s purchase makes sense: The tech giant consolidated resources and took a big step toward Apple-like vertical integration.
But what was going on behind the scenes? How did Google ultimately make this decision? And, more generally, how do companies land on and pressure test and merger and acquisition targets?
Increasingly, consumer conversations and social media data have emerged as powerful tools in the merger and acquisition decision-making process. Conversations on social media can help brands identify which M&A targets will help them accomplish their larger business goals.
In this post, we look at three recent mergers and acquisitions through the lens of social media data with the goal of analyzing the different ways brands can leverage this powerful tool to answer questions like:
- How can social media help identify what consumers want from a merged entity?
- What can social conversations tell us about distinct audiences?
- How can social media analytics help brands better understand M&A impact on brand perception?
Consumer demand is a company’s command
The role of rewards in the Marriott-Starwood merger
Last year, Marriott was crowned the largest hotel company in the world. By buying Starwood Hotels and Resorts for $13 billion, the hotel chain expanded its footprint to 30 brands and 5,700 hotels, with 1.1 million rooms in over 110 countries.
@Marriott Especially that there valet already had my name when I arrived. A very nice touch that shows you appreciate the loyalty.
— Zardu Hasselfrau (@ucs_dave) September 29, 2015
On social media, the announcement of Marriott’s acquisition of Starwood contributed to the majority of conversation in Nov-Dec of 2015 when the deal was first announced. Unsurprisingly, most consumers reacted by questioning the status of their SPG points and made predictions of possible future acquisitions. Other conversations included travelers transferring points, reevaluating their current rewards programs, and looking to apply for new credit cards.
— Maria Constantine (@EmpowHERnow) December 3, 2015
Marriott members were excited about the Starwood acquisition because it meant more travel options. However, Starwood members were frustrated and concerned over their SPG points, wondering if Marriott would honor a fair conversion rate or discredit the points altogether. Some even considered switching rewards programs. But Marriott put consumers’ apprehensions at rest by offering reciprocal benefits to members of each program.
Marriott has acquired Starwood hotels (The W, Aloft, Sheraton, Westin).
I hope this means my loyalty points will be added together into one!
— (@iamSlob) November 16, 2015
As soon as the merger was announced in September, Marriott allowed members of its rewards program and Starwood Preferred Guest to immediately link their accounts and begin earning and redeeming points at all of Marriott hotels.
Your audience is now my audience
How Verizon benefited from capturing Yahoo’s audience
The key to ensuring a smooth transition into a single post-merger entity lies in not letting loyal customers feel estranged. One way to do that is to reward their trust and allegiance appropriately. But what happens when the audience itself is up for sale?
For years, Verizon has been adding to its online and digital reputation. When the giant company decided to acquire Yahoo, it was the latter company’s sizable audience and longstanding reputation that helped convince them to pull the trigger.
When Verizon bought Yahoo in June, the erstwhile internet giant was failing and ready to be nursed back to health by Verizon’s growing media strength. And although Yahoo had lost most if its glory, it still retained a legion of loyal users who came for
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Yahoo Finance and Sports. Internet analytics firm ComScore estimated that Yahoo had nearly 200 million unique visitors just two months before the acquisition, alluring Verizon to bring Yahoo into its fold.
“Verizon stands to expand their audiences significantly,” said Susan Bidel, a senior analyst at Forrester Research told Washington Post. The unified entity combining AOL (which already owns HuffingtonPost and TechCrunch) and Yahoo called Oath presented an opportunity for advertisers to connect with massive audiences that weren’t within its reach earlier.
Comparing Yahoo’s audience with Verizon’s, we can see that bringing Yahoo’s consumer base into its fold was probably a low hanging fruit for Verizon, which trails behind Yahoo in most audience categories.
But trying to win over a loyal audience is almost always a gamble. In the case of Verizon and Yahoo, the social audience was distrustful of what Verizon’s rein would do to Yahoo’s services. Their concerns ranged from getting a flurry of junk emails to the ruin of their beloved Yahoo apps and services.
— Michelle Killmer (@parlerfranglais) August 17, 2017
Yep, isn’t Yahoo, Verizon now? Time to get off.
— Rick (@NH_native_) August 15, 2017
— libsez (@libsez) August 5, 2017
— Mayer Seidman (@MayerSeidman) July 9, 2017
Social media is a great tool to run a check on consumer sentiment to understand how brand perceptions may have been altered based on how an audience reacts to change. With the Verizon-Yahoo takeover, the audience was mostly neutral about the news with some expressing anger and sadness.
Give me your brand, I need to enter the market
How Whole Foods helped Amazon enter a long-coveted vertical
Consumers turn a company into a brand — they are the bulwark of what a business stands for.
And changing consumer preferences should signal a brand to make the necessary pivots. And if those hints are ignored, a business might just fall prey to a mightier giant, as happened with Amazon and Whole Foods.
eCommerce giant Amazon has long wanted to add grocery shopping to its portfolio. When the company purchased Whole Foods last month, it was able to accomplish just that.
Whole Foods’ target audience had long been grumbling about the food seller’s exorbitant pricing on social media that fell on Whole Foods’ deaf ears. With hefty prices for its asparagus water and morel mushrooms, the grocer was alienating the biggest organic-buying audience: millennials.
For Amazon, buying Whole Foods was an easier way to make inroads into brick-and-mortar retail. The acquisition fed into Amazon’s hunger for vertical integration and Whole Foods’ private label ‘365,’ a segment of smaller stores offering cheaper private-label groceries is the fastest way for Amazon to foray and take hold of two markets: physical grocery chains as well as online groceries.
As a Forbes article suggested, “the typical argument for vertical integration is that private brand product is higher margin than third-party branded product. That is true and is an important part of Amazon’s strategy. But even more important is the fact that private brand product represents differentiation.”
Whole Foods’ brand equity cost Amazon $13.7 billion. And it fixed its problem on the first day as the new owner by slashing prices by as much as 43%. It also got validation from the same social audience who welcomed the price cuts wholeheartedly.
The business decision of acquiring or merging with a company is one that involves rigorous and meticulous vetting of risks against rewards. As social media vies to be a credible archive of consumer feedback and brand perception, it plays a critical role in market research. In doing so, could it help big companies identify acquisition targets? Or establishing a brand’s audience and awareness? Could it help companies identify potential markets and geographies to expand to?
Perhaps. It all starts with tuning into the consumer conversations.
For more information on how to leverage social data for powerful business insights, download our comprehensive report below.